Over the last 12 months, development applications in Canberra’s RZ2 (suburban core) areas appear to have slowed almost to a standstill. RZ2 policy is intended to revitalise Canberra’s established areas with much needed townhouse type development for people to “age in place” yet so little development is being pursued, RZ2 policy appears to be failing its purpose for being.
I asked David Shearer who has commented on planning policy in the past to revisit RZ2’s planning and taxation levers.
TT: Have you looked at the viability of small-scale multi-unit development in the RZ2 suburban core areas of Canberra
We receive an average of 10 enquiries each month in regard to RZ2 redevelopment and have worked on numerous RZ2 sites, but not for a number of years. It’s a “go broke” analysis for a builder and there has been virtually no RZ2 multi-unit development in Tuggeranong or Belconnen under increased LVC (lease variation) charges and the planning changes within DV 200 “The Garden City” Variation. Tuggeranong’s population is on a significant downward spiral, so this is a big issue for the viability of local schools, shops and businesses.
Surely higher urban density would allow more use of each site in RZ2, and such zoned land should be in high demand?
RZ2 does not allow any more GFA (gross floor area) for redevelopment than for single dwelling builds (both at 50% GFA). This is a structural planning policy problem, as encouraging people to build large single dwellings doesn’t increase population density or add to the mix of housing available.
TT: How does Lease Variation Charge (LVC) affect the feasibility of development?
That depends on what the development is. For example, a large developer recently built a new hotel in Kingston and completely legally, they paid no LVC whatsoever. Yet if the same house they knocked down to build a hotel was developed as a dual occupancy they would have been billed $60,000 in LVC, so LVC is a huge inhibitor to small residential projects, and obviously not an inhibitor at all to some others.
LVC in residential development is applied as a “per unit” charge so there is a motivation for builders to build fewer, larger, more expensive dwellings to minimise LVC, or not to build townhouses at all, and just build a single big house and pay no LVC at all.
There is strong market demand for smaller more affordable, “age in place” dwellings, but the current planning policy to promote variety of choice and taxation policy (LVC) are in conflict.
In RZ2’s case we have taxation policy driving development outcomes, whilst planning sits in the back seat. Maybe you should ask Ben Ponton what changes he would like to see in RZ2, and in how LVC might be redesigned to encourage smaller affordable dwellings?
It’s pretty simple really, but it would involve a rejigging of the taxation levers. I have no issue with the concept of LVC. However, a “per unit” charge is crude as it is a much higher tax on smaller dwellings, so encourages the opposite type of development that multi-unit planning policy is designed to encourage LVC could easily be redesigned to be more fairly leveraged.
The simple fix for LVC is to pay it per m2 of development, and only leverage that on the GFA of development above what you can build a single dwelling to. If RZ2 planning policy was also redesigned to allow the market to determine unit mix, we would have a big increase in smaller more affordable dwellings being built across the suburbs.
I am sure Ben would love the opportunity to promote how he plans to fix the ongoing undersupply of affordable “age in place” dwellings.